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Friday Financial Five – September 7th, 2012

Friday, September 07, 2012


Surpluses are your friend . . .

Rhode Island sets a budgetary example

They are preliminary numbers, but kudos to our state for doing something that isn’t always easy to do. Rhode Island took in more money than they spent for the fiscal year ending June 30th, 2012. And here’s the shining example that’s been set for us all. Rhode Island spent less in general expenditures than budgeted for. Whether you’re a family household, a condo association, or the state of Rhode Island, it’s always nice to end the year with a surplus. It’s interesting to note that personal income taxes came in slightly higher than projected, corporate taxes came in 6% lower, and unclaimed property came in at $14.5 million.

National debt passes $16 trillion mark

The national debt crossed another significant threshold this past week, surpassing $16 trillion. Instead of the constant finger wagging about who bears responsibility, the future of the country depends on our leaders getting this under control. At some point, the marketplace will decide the U.S. simply has too much debt and stop purchasing government bonds. This might not be readily imminent, but it is possible and would lead to disastrous consequences.

IRS lists Top 10 tax return mistakes for 2012

It’s always interesting to peruse the IRS list tax return mistakes. For 2012 filings, the Top 10 includes miscalculated Social Security benefits that are taxable, overpaid tax on capital gains, and missing information on claimed dependents. We’re in line for significant tax changes before year end so mistakes in 2013 should be just as plentiful.

FDIC sees continued improvement in national credit risk

Banks continue to work through the mess of loans originated in 2006 and 2007. In a recent assessment of the “Shared National Credit” portfolio, it was noted that criticized loans declined 8.1 percent from 2011. There’s still a

long way to go, but there has been improvement for three consecutive years. A continuation of sound underwriting and debt restructuring will continue this positive trend.

Surprising trend: Mutual funds that hold ETFs

ETFs continue to gain in market share and now from an unlikely source: mutual funds. Some mutual fund managers are investing a large percentage of their assets in an ETF with a similar investment objective as their fund. This allows a portion of the fund to trade intraday and helps the manager meet unexpected redemption requests. But it does beget a question: If a major portion of a mutual fund is going to invest in an ETF, why wouldn’t an investor sell the fund, invest in the ETF, and reduce his or her overall management fee?

Dan Forbes is a regular contributor on financial issues. He is a CFP Board Ambassador. He leads the firm Forbes Financial Planning, Inc in Providence, RI and can be reached at [email protected]


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